TY  - JOUR
AU  - Ramey,Valerie A.
AU  - Vine,Daniel J.
TI  - Declining Volatility in the U.S. Automobile Industry
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11596
PY  - 2005
Y2  - September 2005
UR  - http://www.nber.org/papers/w11596
L1  - http://www.nber.org/papers/w11596.pdf
N1  - Author contact info:
Valerie A. Ramey
Department of Economics, 0508
University of California, San Diego
9500 Gilman Drive
La Jolla, CA 92093-0508
Tel: 858/534-2388
Fax: 858/534-7040
E-Mail: VRAMEY@UCSD.EDU

Daniel Vine
Federal Reserve Board
20th Street and Constitution Ave. NW
Mail Stop 82
Washington, DC 20551
Tel: 202-452-3468
E-Mail: daniel.j.vine@frb.gov
M2  - featured in NBER digest on 2005-09-12
AB  - This paper documents the dramatic changes in volatility that occurred in the U.S. auto industry in the early 1980s.  Namely, output volatility declined significantly, the covariance of inventory investment and sales became much more negative, and adjustments to output, which in earlier decades stemmed primarily from plants hiring and laying off workers, were more often accomplished with changes in average hours per worker after the mid 1980s.  Building on the work of Blanchard (1983), we show how all of these changes could have stemmed from one underlying factor%u2014a decline in the persistence of motor vehicle sales.  We use both industry-level data as well as micro data on production schedules from 103 assembly plants in the United States and Canada to document the developments in the early 1980s.  We then use the original Holt, Modigliani, Muth and Simon (1960) linear quadratic inventory model to show how a decline in the persistence of sales leads to all of the changes noted above, including the propensity to use intensive margins of adjustment over extensive labor margins, even in the absence of technological change.
ER  -